If firms receive an economic forecast predicting future increases in the growth of real GDP, they are likely to respond by
A) decreasing their level of investment spending to decrease future production capacity.
B) increasing their level of investment spending to increase current production capacity.
C) increasing their level of investment spending to increase future production capacity.
D) decreasing their level of investment spending to decrease current production capacity.

Question

Quizplus · Accepted Answer

If firms receive an economic forecast predicting future increases in the growth of real GDP, they are likely to respond by increasing their level of investment spending to increase future production capacity. This is because they anticipate an increase in demand for their products in the future and want to be able to meet that demand with enough supply. Decreasing investment spending would have the opposite effect and decrease the firm's ability to meet future demand.

If Firms Receive an Economic Forecast Predicting Future Increases in the Growth